Esthetician Podcast; Business tips for Beauty professionals

098: Esthetician Runway Rule: Can Your Beauty Business Afford That Machine?

• Kari Jo

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We break down the runway burn rule so you can make calm, smart choices about hiring, moving, or buying equipment. A simple formula shows how many months you can survive and when to pause, cut costs, and focus on profitable services to regain control.

• defining runway and burn rate for solo practices
• the three-month threshold for safe decisions
• simple formula using cash, pre-booked revenue, and expenses
• using three-month averages to smooth swings
• why equipment does not fix weak cash flow
• fast fixes to extend runway and reduce risk
• boosting rebooks to stabilize future revenue
• focusing on highest dollars-per-minute services
• teaser for the three times rule next week

All you have to do is in the show links below, the show notes below, there is a form to fill out the business audit form. You’re gonna fill it out. We’ll reach out to you, we’ll schedule a time, we’ll get you on my podcast.

I mentioned this course in the episode if you want to find Your Highest ROI Service (profit per minute) here is the link - https://stan.store/EstheLaunchAcademy/p/get-started-with-this-amazing-course-12gf5

Don't miss this episode I mentioned either - 

090: Easy Consultation Steps for Estheticians: Make Clients Feel Heard, Book More


To learn more about Kari Jo visit: https://www.karijopatterson.com

Want to do a live Business Breakthrough Audit on the podcast with me?

Apply here - https://forms.gle/hMF2MYTUsUMyAW477

Ready to Invest in yourself and your business?

Book a Free Discovery Call - https://stan.store/EstheLaunchAcademy/p/free-20-minute-consultation-

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Links You May Want to Check out:

Join the Client Building for Estheticians group: https://www.facebook.com/groups/clientbuildingforestheticians
Check out Kari Jo’s courses here https://esthelaunchacademy.com

Janel:

Hi, Janel Antel, owner and licensed esthetician of Unalome Aesthetics in Wisconsin. I have a solo practice that was really struggling when I first started out. And I reached out to Kari Jo and did some coaching with her. And I cannot begin to express how grateful I am for everything that she taught me. I have a 98% rebook right now and incredibly busy. I am so grateful for her coaching and her tip.

Kari Jo:

Okay, friend, let me ask you something. Have you ever just felt like that itch to buy that one machine, that one tool, and you believe so much to your soul that if you just get that machine, it is like what's going to make the difference between whether or not you make it in this industry or you don't. For example, like if you just get the laser, you will finally hit making $10,000 a month, right? Or if I just move my business to this new location and it's so cute and the space is so much better, then I will have like more clients and things like that. Guys, here's the truth. Is those are questions that I literally went through and I was sweating bullets trying to figure it out myself. And here's the one thing that nobody told me early on that I want to make sure you understand right now, which is you never go broke from just buying the equipment, right? But what you actually go broke from is you didn't know your runway. Yeah, let me repeat that. You are never gonna go broke from buying the hydrofacial or the laser or upgrading your room or anything like that. But what you ultimately go broke from is because you don't understand your runway. Well, today's episode, I'm going to jump down and I'm going to break down the runway burn rule. And this is a rule that my own business mentor taught me. And I can't wait to dive in and teach it to you guys because it literally changed how I chose to hire on employees, when I decided to move, when I decided to buy a laser, when I decided to buy the hydrofacial, like all of those different things. And so I want to take you back to back in the day when I was running deluxe aesthetics, which was the name of my company, right? And I was so like I was booked all the time. Like I was working sometimes 7 a.m. to 7 p.m., coming in on a Sunday. I was busy. I looked so successful, probably on the outside. But the truth is, is like I was sweating every single month. And you want to know why? It was because I had no clue about my finances, let alone I had no clue about what the heck a runway actually is. Okay. So this is basically how I was living. So if you can relate, girl, I've been there. I know I lived it. This is exactly what I did. Okay. Is I would take all okay, so I had a I opened a business bank account. And then I had my, I used Vigaro as my booking software. And it also was my money processor. What is that called? I can't think of it off the top of my head. You know what I'm talking about. But whenever I would take someone's client's payment, you know, Vigaro would deposit money processor. I really want to know what that is. My brain's stuck. Anyways, okay. So it would take that money and it would deposit it into my business bank account. Now I was so scared to ever take money out of that account because I actually didn't know how much I could take out because I would just the money would go in and then I would pay bills from that. I never paid myself from that. Like I was only like keeping my tips because I was like, I don't know. Like I might need that money. I don't know what is like really going on. So like I was literally living from like money coming in, bills going out. And I at the end of the day, I was praying that my math was completely mathing, but I wasn't even really mathing. So, anyways, well, so anyways, one day my mentor and one of my business mentors, he's actually my brother-in-law, so I'm super lucky. But he is, he's actually into real estate. He buys and sells all sorts of real estate commercials and stuff like that. But he also buys businesses and sells businesses too. And so he just knows so much about finances and everything like that. And one day I was talking to him and he he like we were sitting there and he's like, Kari, you are literally playing like you are literally flying a plane right now, and you have no fuel gauge. And I was like, Yeah, that's exactly what I'm doing. I am literally flying my business, and I have no idea how much is in it or not, right? I I'm just basically hoping to stay in the air and not all of a sudden have like a oh, okay, here we go moment, right? So I feel like that is what most aestheticians are doing. I feel like we start out our business and because we don't get that financial literacy course in school, which we need to. So shout out to anyone who in the future is going to open a school, please add on financial literacy. It is it will change every esthetician's life that is struggling. Okay, but going back, so, anyways, he taught me this one rule, and it is called the runway burn rule. It is like every business has a runway burn rule. So once I learned this, I started using it for all of my decisions. Like if I was hiring an employee, if I was hiring a nurse, if I was buying the laser, if I was going to buy a building and all of those different things. Okay, so first and foremost, you're probably wondering what is the runway? Okay, your one-rate is basically how many months your business can survive if you're not going to make a single dollar, right? So, right now, how many months would your business survive? So think of it like this every single month, your business burns money. It burns money on rent, it burns money on product, it room fee, service fee, software fee, Instagram, running ads, who knows, whatever it is, all of those expenses that is your monthly burn, right? Now, on the flip side, you have cash in the bank and/or you also have appointments on your schedule, right? So you know about how much money you're gonna be making in the future. That is your runway fuel. Okay. So if you've got six thousand dollars of cash, right, in cash and pre-booked appointments, right? And you have to pay about three thousand dollars every single month, then you have a two-month burn. Well, I mean, you have a two-month runway basically. So it means that you have two months before your business has nothing and things are like, oh shit, right? Now, if you want to stay out of the survival zone of like trying to survive like I was, right? Then you must know your business runway. Now, I said like clearly, I'm like, you know, you're wondering, can you buy the hydrofacial? Can you buy the laser? Can you buy, I don't know, a microneedling pen, whatever it is, right? Here is this one truth. Okay, you cannot buy anything when your runway is less than three months. Does that make sense? So if you don't have a three-month runway, don't don't you can't consider it. You can't, I don't care what it is. That laser, the hydrofacial machine, a scanner, whatever, I don't care what it is. Your one, if your runway is under three months, then it is a big giant, nope, can't do it. Don't do it. And the reason why is because if you're buying something when you are like financially fragile, it's going to make you so dependent on the one thing to save you, right? You are this is like going to bust you, right? Equipment, just so you guys know, equipment will never save you. Okay. Write this down. Equipment will never save you. You have to be stable first and then upgrade always, every single time. I had this girl that she came to work for me one time. We had a hydrofacial. Obviously, our hydrofacial, and I'm not saying that you guys should get one. Ours ran really well. Like it was like, I mean, it was one of the most money-producing assets that we had, but we had the clientele for it. I'm not saying go get that, especially if you're in like money problems. You know what I mean? Build your clientele stable first, follow this rule first. Anyways, she ended up like quitting, and then she went and opened her own thing. And she immediately quit, went and bought a hydrofacial machine because she literally thought that if she had the hydrofacial machine, she was going to be making as much money as my company was, right? But the truth was she didn't have any burn weight, and literally she ended up calling my company back and asking if we would buy the hydrofacial from her because she made a really dumb purchase. Like, you've got to have you have to be stable first and then upgrade. Now, how do you calculate your runway? I'm gonna make this ridiculously simple. So this is the part where you might want a pen and paper, pause it or come back to it, whatever you want to do. This is where it might get a little bit complicated. So have something while you're listening. Okay. So here's the formula cash in your bank. You take the cash in your bank and your future appointments, and you divide that by your monthly expenses. That equals your runway. So spend say $4,000 a month, but you have uh $12,000 in your account. Well, then your runway, you have a three-month runway for your business, right? That is the formula. Now I get that month's good. Like, I feel like one thing that would help you that helped me is like I like my my expenses are constantly changing every month. So it's hard to be like on say, oh, you know, it's it it cost me $2,000 to run my company every single month. That is why you always want to work with averages when you're figuring out your finances, right? So when you're trying to figure out your say monthly revenue, what I would do is I would write down what my monthly revenue was for three months, and then what was the average, right? And that's a good predictor. And then the same thing for my monthly expenses. I would write down, I would figure out what my monthly expenses were in say like October, November, and December, and I would get the average of that. And that is about, you know, because you're gonna have fluctuates, right? We have like dips, things go good, things go down. So you're gonna do that, and you're going, so again, you're going to take your revenue, you're gonna subtract your expenses, that's going to equal your monthly burn. And then once you have that, then you want to also calculate the money in your bank that you like all any that you have in savings in your checking account, and then any money that is already booked out on your schedule, right? And that is like your total revenue that is going to be coming in. So take your cash, divide it by your burn rate. That's going to tell you your runway. Now, if you have anything less than three months of runway, do not buy the equipment. Don't hire, don't expand. You need to stabilize your company first. And I promise this role alone, it will keep like 90% of estheticians completely out of panic. Now, let's say you're listening to this and you're like, well, Kari, I'm at a one-month runway and I'm like screwed. And I really need this stinking, I'm screwed, and like I need this microneedling pen, I need this new room, I need whatever it is, right? Let me just tell you, you are not screwed. But like, this is like what you can do to try to fix that really quickly. Okay. So first, cut unnecessary expenses, right? So if you're paying somebody to help with, I don't know, social media or something like that, cut that out. Like, nope, we're not gonna do that because we need a burn, we need like some runway. So cut any indirect expenses that does not make you money. If it doesn't make you money or save, like, and I want to say save you time, but like I mean social media can save you time, but like if you can cut it, cut it, right? So that will help your your runway for a little bit. Another way that you can do it is, guys, I focus on this a lot, and there is another episode that you can listen to, and I should tag it in the show notes. I'm gonna tag it in the show notes. You need to increase your rebooking rate. Okay, you need a system, you need to increase your rebooking rate. That will automatically help you. And last but not least, start focusing on your highest return on investment service, right? And I do have a course that teaches you that as well. I should just add that to the link below as well. If you don't know what, like basically that my my brother-in-law, he taught me this role too, which is you got to find out what service you're making the most money on per minute, right? And so if you really are desperate and you need money, focus on that one service, the one service that you make the most money on per minute, and like pound that out, market that because you're gonna get whatever you market is what you're gonna get, right? And so, like, if you need money quick, start focusing on that. Okay, so now if before you buy anything, before you take on any debt, before you invest in any machine, you have one question to ask yourself, and that is how many months of runway do I actually have? If it's under three, you need to stabilize your company first, right? If it's over three, you buy it. No, I'm kidding, I'm kidding, I'm kidding. Don't do that. Don't go and buy it, right? If you're over three, you gotta go to rule number two. That's right. Like it doesn't stop here, guys. But it would be so much. If I just gave you all of this in one big episode, you guys would be so lost because you'd be like, wait, this is so over my head. So I'm breaking it down in a two-part series of how to figure out if you can stabilize. So, again, figure out your runway. And if it's over three, we're gonna move on to rule number two. And I'm going to teach that in next week's episode. So today we learned about the runway, the part that's gonna protect you from going broke. But next week, I'm gonna teach you the one rule that's actually gonna help you make money from your equipment. And it's called the three times rule. And I'm sure you probably heard about it, but I'm actually gonna break it down for you in a way that you can understand because it's how my brother-in-law taught me. And it's just so nice to like, I don't know, have it broken down into a simpler form, right? And it is going to literally change how you look at your investments the rest of your career. So make sure you hit follow, tune in next week. I release every Wednesday. I am going to do like this episode and the next one. It's like one week after another, it's a series. We're like doing a series together. Surprise. Okay. Now, last thing before we wrap up, I want to say, guys, if you are listening right now and you are maybe in the survival phase, or maybe you're in the growth phase of your business. Maybe you're paying yourself, maybe you're not paying yourself, maybe you're like thinking of hiring, maybe you're not. Maybe you don't know what promotions to do for the holidays. I don't know what it is, or maybe you're wondering about tax time. Okay. Girl, come on my podcast. Let's solve this together. All you have to do is in the show links below, the show notes below, there is a form to fill out the business audit form. You're gonna fill it out. We'll reach out to you, we'll schedule a time, we'll get you on my podcast, and you will get the answers that you want to know from someone who has done it. Guys, I have been in this industry for 20 years. I built and sold my company in eight years. I'm nothing special. You can do it too. I just learned systems. Literally, that is what I do. I teach systems. And listen, if you actually want to work with me one-on-one, I do do coaching, I do do VIP coaching. I only take a few at a time. So, because I'm homeschooling. And guys, I am loving homeschooling. And I'm sure you guys don't care about my personal life at all. But if you do, guys, let me tell you, hope okay, the tune out if you're like bored. But if you want to find out a little bit about homeschooling and a little bit about what's going on in my life, here you go. There's like a little bit of extra. So, yeah, so I decided to pull my son out of school. He's in kindergarten. I decided to do homeschooling, and I am loving it, other than the fact that I'm recording this podcast and he's like playing and being so loud in the background. And I'm like, oh, this, I don't know how this is gonna work out. But But it's going so well. And the one thing that I love about it is before I did homeschooling, I kind of felt like I was a bad mom. And I felt like I was a bad mom because like I would work all day, I'd come home, I'd be tired. I don't want to play Legos or Barbies or any of that kind of stuff. But like for some reason, for me, I'm just the type of person that like I feel like I have to do that in order to be a good mom. Do you know what I mean? And I wasn't doing it. So when I decided to do homeschooling, it was like super nice because it puts me in a position where I'm like with my son all day long and I'm working with him with a bunch of different things. So it fills my cup as in like it filled the cup that I needed. So I don't always feel like I'm failing as a mom. But the best thing about homeschooling that I have done recently is I use chat GPT for my schooling. I don't use a program. Like I know the big and beautiful or something like that is really popular, but I don't do that because I went into chat and I like asked chat if like with the way that the world is going right now, if it was to raise a kid that was prepared for the future, what would it do? And it, you know, gave me a list of all of these different things. Like for one, it was like, I would not definitely not homeschool. And the reasons why it said that it wouldn't homeschool, I'm gonna let's see. I basically asked chat, I was like, if you were to raise a kid and prepare for the future, you know, knowing everything that Sam and Elon Musk and everything has said about what's going on with AI and things like that. Like, would you homeschool your kid? Would you put him in school? What would you do to make sure that your kid is ready for the future? And I was like, I would homeschool him 100%. And here is why. And it said, well, first, public school wastes 70% of time on compliance and not mastery. And it's a one-size-fit-all pacing. And so your kid will be bored by the third grade, or they are going to be completely lost in the noise. It said, socialization, it teaches your kids to fit in, not to stand out. And then GPA and test scores, they are going to keep mattering less and less every single year because AI writes perfect essays and all of those different things. And then last, you know, well, not us, there's a bunch, but um, public school optimizes for 1950 factory workers and not AI navigators. So it was interesting what it would do. Okay, I gotta just tell you if you have a kid right now and they're between zero to five, it says what he would do is he would allow no screens whatsoever, TV or iPad, until the kid is three. He would let him wire his brain with 3D reality, like stacking blocks and things like that. He would do language immersion. So he would make sure that his kid was bilingual by the age of five. And particularly with English and Mandarin, because future AI will handle all translation, but your kid has to be able to think in multiple systems. And then it said it would make him play the piano or drums, because those two instruments force bilateral brain coordination and pattern recognition faster than any app. And then, of course, like let him risk play, climb trees, skin his knees, learn physics through bruises. AI can't stimulate consequences. So that's what he would do until the age of five. And then it goes into like all these others, which I'm not going into. But what I was gonna say is it's so fun. I am using AI to you do homeschooling. And so, like, for example, my little boy, he does like Minecraft, and so he likes all the building equipment. Well, one day we're driving, he's like, I need a glass wall, mom. And I was like, okay, and he's like, Do you know how to make glass? And I was like, no, and he's like, I do, and I was like, okay, how do you make it? And he's like, sand and fire. And I was like, okay, well, I don't actually know. So I went to chat, you know, and I'm like, hey, how do you make glass? And it makes sense because I watched that movie with I don't remember her name in it. Anyways, where they had like lightning in the glass, Alabama, sweet home Alabama movie. Okay, anyways, and so, and of course, chat's like, yeah, it is. But because like he was interested in that, I was like, okay, this is what my little boy is interested in. Like, what can we do from that? And so we just continued going down like these experiments, like, whatever my little boy is interested in, like, I have chat build a lesson around that. So, like, we're literally building his entire learning around him. Like the other day, we were down at the beach, and so I was like, We're at the beach in Corpus Christi, and I need to teach my son, we need to do something in science or engineering today. And so it's like, okay, let's go learn about erosion. And so I had no idea about erosion, so I feel like I'm becoming smart homeschooling. So my son, like, built, you know, he had to build this wall, and we're talking about materials, and I was like, what kind of material is really strong? Well, because he plays Minecraft, he's like obsidian, and I was like, in my head, I was like, I don't even know what the heck obsidian is. I was like, let me ask chat. So of course I go to chat, and the chat's like, that is so smart. You should tell your little boy that's so smart because in Minecraft, obsidian is incredibly strong. It's the strongest material, but in real life, obsidian is actually very weak. And so then we did we ended up the next week doing this whole experiment on building quote unquote obsidian or making obsidian, you know, like we pretended to make lava and all of that stuff with sugar, and it was really fun, but anyway, so I just thought I would entertain you with what's going on in with my life. So that's what I'm doing. I'm like deep into homeschooling, and then my little boy, we do do a co-op, so he goes to a co-op two days a week at a church, and then that's when I do all of my work and work on my podcast. And even though today I'm doing it on a Friday when he's not there, I do try to do it on days that he's like actually gone. But yeah, all right, guys. Well, I hope this was entertaining. And again, I will see you next week and we will be going over can you buy that stinking machine? See you next time. Bye, guys.

Announcer:

Thank you for listening to the Esthetician podcast with Kari Jo Patterson. Each week, Kari brings you real-world lessons on how to grow your empire. To learn more about Kari's fearless prosperity mastermind group, one-on-one VIP coaching opportunities, and more, visit wwwkarijo patterson.com. That's www.karijopatterson.com. See you next week for more insights and strategies on the Esthetician Podcast.